Balance Your Checkbook as Often as Possible (55/365)

You should always know what your checking account balance is.

Let me repeat that.

You should always know what your checking account balance is.

That includes outstanding payments you’ve made that haven’t posted to your account yet. That does not include income that hasn’t been deposited yet.

The more you deviate from this, the more you’re begging for things like overdrafts or situations where you go to an ATM and unexpectedly find yourself unable to withdraw anything due to insufficient funds, both of which can be financially disastrous.

I now keep good track of my checking account, but in the past, I didn’t do that very well and I came incredibly close to overdrafting several times. I didn’t do this on purpose, mind you. I did it because I didn’t balance my checking account nearly as well as I should have, and without some real luck more than a time or two, I could have been faced with some serious charges.

Balance Your Checkbook as Often as Possible (55/365)

There are two simple tactics you can use to make sure your checking account stays above water at all times.

First, maintain a constant “buffer” in your checking account. That means that you should consider any balance below a certain amount a serious financial problem that needs to be rectified immediately. I have kept a buffer of at least $500 for years now, just as a safety measure.

Second, keep some sort of physical track of every transaction in and out of your account at least until it appears on your statement. One way to do this is with a checkbook ledger. The method I use is to simply keep track of every transaction that has not yet posted to my account on a pocket notebook so that I can compare them to the balance of my checking account online whenever I need to do so. Checks are the real challenge here – they often take several days to post. This is another reason why I prefer online bill pay, as it makes such balancing much easier.

Why don’t I suggest that everyone use a checkbook ledger? Checkbook ledgers are really good ideas if you write a significant amount of checks each month, but I – and many of my friends – rarely write checks at this point. We use online bill pay and other such services. The biggest lag that I often see with transactions in and out of my account are point-of-sale ATM withdrawals, which can sometimes take a couple of days to post.

The key is that you should be able to quickly identify your balance at any moment with jut a bit of simple addition and subtraction. This is particularly important if you don’t have a large buffer in your checking account or if you’re about to make a large purchase.

Another note: never assume that money will arrive in your checking account on the promised date. In fact, if at all possible, you should never make financial moves on the assumption that money will arrive in your account tomorrow.

Not only do such transfers often happen a day or two slower than you expect, but the banks – if given an option – will often order transactions in a way that will cost you money.

I’ve had automatic transfers and paychecks show up in my account days later than expected. I’ve had some transfers never arrive and eventually found myself contacting banks to get things straightened out. I even had one lengthy disputed bank error that eventually led me to change banks.

Do not rely on money that’s not sitting in your account yet. Instead, know your balance and rely on that to the best of your ability. This will keep you above water, no matter what.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

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